Question 2 (6 points) On January 1, 2016, XYZ Company purchased 10,000 shares of the stock of Rayco, and did obtain significant influence. The…

Question 2 (6 points)

On January 1, 2016, XYZ Company purchased 10,000 shares of the stock of Rayco, and did obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $90,000, and represents a 30% ownership stake. Rayco made $25,000 of net income in 2014, and paid dividends of $10,000. The price of Rayco’s stock increased from $10 per share at the beginning of the year, to $12 per share at the end of the year.

Requirements:

  1. Prepare the January 1 and December 31 general journal entries for XYZ Company.
  2. How much should the XYZ Company report on the balance sheet for the investment in Rayco at the end of 2016?

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